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Mineral Royalties

From April 2013 all mineral royalties will be taxed 100% to income tax rather than 50/50 to income tax and CGT as at present. In preparation, individual and trustee owners of land used for mineral extraction may wish to reconsider their strategies with a view to minimising their likely income tax liability under the new rules. One possibility is transferring to corporate ownership to take advantage of lower corporation tax rates. 

Trustees of both life interest trusts and discretionary trusts could also consider whether they might structure receipts from mineral extraction in such a way as to limit the income tax rate chargeable on some of the receipts to the basic rate of 20%. Where mineral royalties are capital as a matter of trust law rather than income but are subject to income tax, then the trustees' 50% rate of tax may not apply. Income tax is instead limited to the basic rate. However, the taxation arrangements of mineral leases held by trusts can be complicated and we are happy to provide further advice on request in relation to any clients affected by this measure.

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Bankside Office

240 Blackfriars Road
London
SE1 8NW
DX 53 Chancery Lane

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

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